Correlation Between Eureka Design and Tropical Canning

Can any of the company-specific risk be diversified away by investing in both Eureka Design and Tropical Canning at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Eureka Design and Tropical Canning into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eureka Design Public and Tropical Canning Public, you can compare the effects of market volatilities on Eureka Design and Tropical Canning and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Eureka Design with a short position of Tropical Canning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eureka Design and Tropical Canning.

Diversification Opportunities for Eureka Design and Tropical Canning

0.01

Correlation Coefficient

Eureka Design  Tropical Canning

Significant diversification

The 3 months correlation between Eureka and Tropical is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eureka Design Public and Tropical Canning Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tropical Canning Public and Eureka Design is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Eureka Design Public are associated (or correlated) with Tropical Canning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tropical Canning Public has no effect on the direction of Eureka Design i.e., Eureka Design and Tropical Canning go up and down completely randomly.

Pair Corralation between Eureka Design and Tropical Canning

Assuming the 90 days trading horizon Eureka Design Public is expected to generate 1.72 times more return on investment than Tropical Canning. However, Eureka Design is 1.72 times more volatile than Tropical Canning Public. It trades about 0.16 of its potential returns per unit of risk. Tropical Canning Public is currently generating about -0.08 per unit of risk. If you would invest  50.00  in Eureka Design Public on September 4, 2024 and sell it today you would earn a total of  15.00  from holding Eureka Design Public or generate 30.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Eureka Design Public  vs.  Tropical Canning Public

Eureka Design Public

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eureka Design Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Eureka Design sustained solid returns over the last few months and may actually be approaching a breakup point.

Tropical Canning Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tropical Canning Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Eureka Design and Tropical Canning

The main advantage of trading using opposite Eureka Design and Tropical Canning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eureka Design position performs unexpectedly, Tropical Canning can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tropical Canning will offset losses from the drop in Tropical Canning's long position.

The idea behind Eureka Design Public and Tropical Canning Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.